As a small business, managing obligations, such as tax, is key to sustaining financial health and identifying growth opportunities. The Australian Taxation Office offers various deductions with different criteria, allowing you to reduce your overall tax bill and maximise your savings after June 30th. 

Preparing and maintaining a workspace can incur ongoing costs to provide energy and equipment, so what support is there for people operating from home?  

Stick with us as we reveal several deductions for home-based businesses in Australia.

What You Need to Know About Deductions

Tax deductions reduce the amount of accessible income that the ATO reviews for tax purposes. It’s usually equivalent to or a portion of the amount you paid out of your personal finances to complete work duties and sustain a workspace. 

To claim a deduction, you must keep receipts, invoices, and other key documents proving the purchase of work-related items or bills. These documents are necessary for your claim to be eligible. 

You might be unable to claim further deductions on bills or running expenses if you’re part of the 0.67 cents Fixed Rate Method

Tax Deductions for Home-Based Businesses

The ATO recognises home-based businesses as entities where people work primarily from home. Here are several deductions you can claim:

Running Costs

Running costs refer to expenses paid to keep the workplace ticking over. You can claim deductions on the following:

  • Electricity and lighting
  • Phone bill
  • Cleaning
  • Furniture

As some of these bills go towards regular living circumstances, you must calculate the portion supporting your job. 

To calculate the electricity spent working, for example, you’ll need to consider the cost per kilowatt, the number of units you’ve used, and the hours spent using electricity for work purposes. Consider using the ATO home office expenses calculator to estimate the total expense. 

Occupancy Expenses

Occupancy expenses cover the ownership of the property where you work. These bills include:

  • Mortgage interest rates
  • Rent
  • Council bills
  • Land tax
  • Home insurance

Again, you’ll need to calculate a portion of the bill covering your workspace. You can do this by measuring your work area. Next, calculate the percentage of the total property dedicated to your home office. You’ll retract that percentage from the bills above. 

Asset Depreciation

Although you can receive mobile phone deductions and claim on goods like printers and ink, items purchased for more than $300 are considered depreciating assets. For tax deductions, you must calculate depreciation every year. 

First, consider the salvage (end-of-life) value minus that from the figure you paid and divide the result by the expected number of useful years. You can immediately deduct items below $300. Our business services include calculating and applying depreciation to your tax return. 

Vehicle Trips

Motor expenses refer to fuel spent attending the following places:

  • Suppliers and vendors
  • Post office and banks
  • Tax agent appointments
  • Clients appointments to provide or deliver goods and services

Consider the logbook method to track work-related journeys, as this will help you justify a separation between personal and professional trips on your tax return.

Take Advantage of Tax Deductions with Advisory One

Do you need to figure out which deductions apply to you? Or are you seeking new ways to plan financially to optimise savings? We’re here to help–contact us to discuss how we can help you.